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S&P 500, Nasdaq close higher

The S&P 500 and Nasdaq climbed following a crushing Tuesday equity rout.

The S&P 500 (^GSPC) rose 0.3%, or 8.04 points, as of market close. The Nasdaq (^IXIC) advanced 0.92%, or 63.43 points. The Dow (^DJI) was little changed and fell less than 1 point at the close, erasing gains of more than 200 points at the intraday high.

On Tuesday, an equity selloff turned the S&P 500 and the Dow negative for the year. Both indices are still lower for the year-to-date as of Wednesday’s close.

In the wake of Tuesday’s massive sell-off, some investors have questioned whether the Federal Reserve will maintain its current path of planned rate hikes. However, since 1994, the Fed has responded with more accommodative policy only when other financial conditions, such as credit spreads have also deteriorated substantially or when growth is below its potential, Jan Hatzius of Goldman Sachs wrote in a note.

“We expect the Fed to hike at the December meeting despite the recent stock market decline, with a subjective probability of 90%,” Hatzius said. “Subsequent moves will depend on the data, but our baseline forecast remains four more hikes in 2019 with risks that are broadly balanced.”

The OECD predicts that US growth will be 2.9% in 2018, but will then slow to 2.7% and 2.1% growth in 2019 and 2020, respectively. Trade tensions are primarily to blame, according to the OECD, with protectionist policies already contributing to a 0.1 to 0.2 percentage point decline in global GDP this year.

The International Monetary Fund in early October slashed its prediction for 2018 global economic growth to 3.7% from 3.9%, citing trade tensions and emerging market instability. The IMF foresees U.S. growth of 2.9% in 2018, followed by a deceleration to 2.5% in 2019.

Bruce Kasman, head of economic research at JPMorgan, wrote in a note Tuesday that the outlook for 2019 revolves around four tensions: U.S. strength versus sluggishness in the rest of the world, macroeconomic policy supports versus geopolitical drags, robust corporate profits versus capital expenditure growth and rising wage inflation versus a flat CPI Phillips curve.

“The economic outlook for 2019 revolves around the expansion’s resiliency in the face of these four tensions,” Kasman said. “Our baseline forecast judges the fundamental backdrop as healthy. Income is growing in a balanced manner, credit is flowing relatively easily, and fiscal and monetary policies remain supportive.”

STOCKS: Deere & Co shares climb despite earnings miss

Deere & Co (DE), the world’s largest tractor manufacturer, missed consensus expectations for fiscal fourth-quarter earnings and delivered guidance for 2019 net income that fell below estimates. Fourth-quarter adjusted EPS came in at $2.30 versus estimates of $2.45, and net sales totaled $8.34 billion, falling below consensus estimates of $8.64 billion, according to Bloomberg data. The company said it foresees net income of about $3.6 billion in 2019, while analysts were expecting $3.7 billion.

Despite the misses, shares rose after the company expressed optimism even amid the growing trade war with China, which has taken a toll on U.S. farmers. “In the U.S. overall both farmer and dealer sentiment remains cautiously optimistic,” John D. Lagemann, Deere SVP of Sales and Marketing in the Americas, said on a call with investors. “While there is uncertainty in the soybean market there is optimism around improved fundaments…in the corn, wheat and cotton markets.”

Shares of Deere climbed 2.43% to $141.89 each as of market close.

Gamestop’s (GME) stock spiked after the company announced Wednesday it plans to sell its Spring Mobile business to Prime Communications for $700 million. Spring Mobile owns and operates more than 1,200 AT&T wireless stores. The video game retailer said it expects the transaction will close in the fourth-quarter of fiscal 2018, following regulatory approvals and closing conditions. Gamestop said it will use proceeds from the sale to reduce outstanding debt, fund share repurchases and reinvest in core video games and collectibles to help boost growth. Gamestop’s stock jumped about 15% following the news before paring some gains. Shares climbed 11.56% to $13.70 each as of market close.

ENERGY: Oil prices rebound after posting sharp declines Tuesday

U.S. crude (CL=F) oil prices spiked more than 4%, turning around after falling about 6% on Tuesday and reaching a new one-year low. U.S. West Texas Intermediate crude oil prices increased as much as 4.5% to $55.86 per barrel before paring some gains and settling at $54.63 per barrel. Brent crude (BZ=F), the international benchmark, settled at $63.48 per barrel. Energy was the best-performing sector in the S&P 500 on Wednesday.

The rebound in oil prices comes despite U.S. government data pointing to a continued increase in domestic stockpiles. U.S. crude oil inventories rose by 4.9 million barrels for the week ending November 16, the U.S. Energy Information Administration said in a report Wednesday, outpacing consensus estimates for an additional 3.45 million barrels in inventory for the week, according to Bloomberg data. This marks the ninth consecutive weekly build for crude stockpiles.

ECONOMY: Durables fall short of forecasts, jobless claims rise

Durable goods orders tumbled 4.4% in October, accelerating declines following a 0.1% decrease the month prior, according to advance data from the Commerce Department on Wednesday. Consensus estimates foresaw a decline of 2.6% in October, according to Bloomberg data. Sharp declines in transportation orders contributed to the decrease, with new orders declining 12.2% between September and October.

Capital goods orders excluding aircraft were little changed in October after a 0.5% decline in September. Consensus estimates had been for a 0.2% decline in October. Capital goods shipments excluding aircrafts rose 0.3% in October, turning around after a 0.2% decline in September and registering in-line with average analyst estimates.

Jobless claims increased to 224,000 for the week ending November 17, from an upwardly revised 221,000 the week prior, according to data from the Department of Labor Wednesday. This outpaced consensus expectations of 215,000 new unemployment claims for the week. Continuing claims rose to 1.668 million from 1.67 million the week prior.

“In short, claims are up slightly in the last two months, even after excluding hurricane-affected states,” Jim O’Sullivan, chief U.S. economist for High Frequency Economics, said in a note. “The rise is too small to be significant yet, and the level remains historically low, but a continued rise would be concerning.”

The University of Michigan’s Consumer Sentiment index fell to 97.5 in November from 98.3 in October, according to a statement released Wednesday. Consensus estimates foresaw the index holding at 98.3 in October, according to Bloomberg data. October’s reading falls near the center of the 11-month range spanning 95.7 to 101.4.

U.S. existing home sales rose to a seasonally adjusted rate of 5.22 million in October from 5.15 million in September, according to a statement Wednesday from the National Association of Realtors. This outpaced consensus expectations of an increase to 5.2 million existing home sales in October. The uptick in October follows six consecutive months of decreases.

“Gains in the Northeast, South and West – a reversal from last month’s steep decline or plateau in all regions – helped overall sales activity rise for the first time since March 2018,” Lawrence Yun, NAR’s chief economist, said in a statement.